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7 Components of an Effective Modern Compensation Plan for Remote Employees

7 Components of an Effective Modern Compensation Plan for Remote Employees
7 Components of an Effective Modern Compensation Plan for Remote Employees
Creating fair and consistent compensation plans is essential in a remote work world, where employees who work remote.
Posted in: Remote Work
7 Components of an Effective Modern Compensation Plan for Remote Employees
7 Components of an Effective Modern Compensation Plan for Remote Employees

 While some people work from home to spend more time with their kids or for their comfort, it's the pay that takes the day for most people. You see, remote employees from developing countries have a chance to get well-paying international jobs.

Even people not from across the globe benefit from these remote jobs. They're saving money on commuting, and if they find a better job in a different city, they don't have to move their entire families or commute for hours every single day.

In other words, however, you decide to look at it, the majority of benefits of remote work revolve around compensation in one way or another. 

With that in mind, here are the top five components that should allow you, as an employer, to create an effective modern compensation plan for your remote employees.

  1. Tailoring compensation for the global workforce

As an employer of a remote team, you're often in a difficult spot. On the one hand, you want to pay your employees fair wages for their work, but at the same time, you're getting to reduce the cost of your payroll by hiring experts from regions with a lower purchasing power parity.

Fortunately, you can have the best of both worlds with a remote workforce. In some areas, you can pay an expert less than what you would pay a native and still pay them more than what they would get for an equivalent position in their own country. Sometimes, this can be 2-3 times more.

So, how do you determine what's right:

  • Local market research: Try to look for jobs similar to what you're hiring for. Look up what they're paying. Then, check what the same job would pay in your region. Ideally, you're trying to hit the soft spot between the two.
  • Cost of living difference: While you may believe this doesn't concern you, that's where you would be very wrong. An employee who can't sustain themselves with your wage will either find another job or quit as soon as they get a better opportunity. You want to be this better opportunity, not a temporary solution.
  • Exchange rate and fees: The exchange rate in the target country may be incredibly unfavorable, and the same goes for transfer fees. While this doesn't matter at first, as soon as your employees feel this on their paycheck, they might start seeing things differently.

Innovative payment methods can partially mitigate this last part. Speaking of which…

2.Crypto token compensation

While some employees love working from home, others have less comfort-oriented reasons for working remotely. For these employees, access to remote areas with much higher wages. Even if they don't get paid as natives of the country where the country is, these reduced wages often supersede their local salaries by quite a margin.

Now, one of the problems of getting paid in a foreign currency, even if it's a major one like USD, EUR, or GBP, is that you might lose quite a bit by converting them into a local currency. Some of these exchange rates are outright theft. Some regions are quite stringent regarding this and won't allow citizens to withdraw these currencies directly. Instead, the bank or card issuer will handle the conversion for them at a very unfavorable rate.

This is one of the main reasons you might want to pay employees with token compensation. The fees are much lower, and you can avoid conversion fees. After all, they're not converting crypto tokens; they're either paying with them directly or selling them. They are quite convenient for international transactions, and the holder usually doesn't need to have anything other than a smartphone app.

The biggest problem with this is the local taxes and crypto regulations, yet crypto compensation is always:

  • Just one of the options
  • Something that the employee has to agree on

In other words, you can pay them more conventionally; it's just that you're offering them one more option. 

3.Stock options and equity grants

 One of the biggest challenges of working with remote employees is evoking a sense of loyalty and belonging. Let's face it: no matter how good of a discourse they're having, it's hard to get so attached to people you've never met. Changing one remote job for another is not that big of a difference for them. It doesn't change their commute or the people they're surrounded with. At most, they might switch from Trello to Basecamp or Monday, and that's it.

Sometimes, when you have an employee who's too valuable to lose, you can offer them a bonus in the term of an equity grant. This way, you're giving them a small number of shares in your company, giving them a sense of ownership (as well as actual ownership).

You can also give them the right to purchase a specified number of company shares at a predetermined (a bit more favorable) price, which produces a similar effect. Alongside this, you should also provide them access to a cap table management software so they can understand and track their ownership stake.

The benefits of this idea are quite numerous:

  • Alignment of interests: Once you give them this equity, your best interests and their best interests align. You no longer have to struggle to motivate them since they know a company's growth is in their best interest. Also, this is more effective as a motivator than any bonus ever could be.
  • Long-term commitment: you don't leave as easily a company in which you have a vested interest. Once they get these shares, they're there
  • Performance incentives: Needless to say, this type of reward should be reserved only for the best ones among your staff.

All in all, it's an option worth considering. 

4.Stipends for home-office setup

One of the biggest challenges remote employees face is the fact that they have to pay for their setup. This usually involves a computer or a laptop, several screens, a reliable smartphone, etc. Sure, the majority of these items are something that they're probably already equipped with. Still, you may need them to upgrade, so why not offer to help with this?

The first message that this sends to an employee is the one of a partnership. After all, a stipend will usually not cover all of these costs, but it will cover some of them. In other words, this is a great way to share the financial burden of remote work with your employees. To them, it helps out quite a bit financially, but it also shows them that you care.

This doesn't have to be restricted to hardware; you could invest in an ergonomic chair or an adjustable desk. This way, you're indirectly investing in the health of your employees. The same goes for office supplies or paying a part of their internet or utilities.

Bear in mind that you also need to have eligibility criteria. You can't buy a new laptop for someone who has just started working for you and might leave in a week or two. 

5.Open salary discussions

There's a stigma about the fact that you can't discuss salary in the workplace. 

Some employers even openly scold their employees for discussing their paychecks with their coworkers. There's no need for this if you're doing everything above the board.

First, you need to start with a transparency initiative. Establish pay grades in your enterprise and disclose that people within each pay grade (even in different departments) are making a similar hourly wage. This is also a great incentive for employees still on the fence about whether to remain in your enterprise.

Second, you need an open-door policy regarding salary discussions. Your employees must know they won't be reprimanded for asking salary-related questions.

Remember that most of your employees won't be comfortable bringing up this topic. In fact, this is one of the topics that interest them the most. If they say otherwise, they're just grandstanding. Well, if that's the case, why not be the one to bring this up? They'll appreciate it, even if they don't express this gratitude openly.

These discussions usually take place face-to-face, which could be a bit tricky via remote communication platforms. Sure, video calls often replace face-to-face conversations, but some employers still feel uneasy about it. 

This is just one of the reasons why internal communication tools need to be established as early in the process as possible. Still, if you have open salary discussions and nurture this culture, there's nothing to worry about. 

Figuring out compensation is sometimes more difficult than just making a payment

Figuring out how to compensate your employees can be just as important as how much you pay them. Ensuring they're not robbed by fees and unfavorable exchange rates is a great psychological boost. Offering to pay for their laptop repair is more personal and involved than just giving them a bonus. Overall, you won't be able to establish this without a candid conversation.  

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Wednesday, 17 April 2024
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